The UPU wants to help citizens living in rural areas gain better access to remittance channels that are affordable, secure and formal.
UPU Director General Edouard Dayan delivered that message this week at an annual meeting of the Financing Facility for Remittances organized by the International Fund for Agricultural Development (IFAD) in Rome.
The Financing Facility for Remittances funds projects to reduce the cost of sending remittances to increase access to financial services. The latter enables local economies to benefit from remittances and migrant capital. It was through this mechanism that the UPU and IFAD worked together to extend money-transfer services to 355 rural post offices in six West African countries in 2008.
Targeting rural areas
Dayan told the audience that postal services are ideally positioned to offer remittance services, especially in rural areas given postal operators’ far-reaching network.
According to UPU data, 81 per cent of post offices in Sub-Saharan Africa are located in areas outside the three biggest cities of each country, where more than 80 per cent of the population lives. “The post office is often the only contact point between citizens and their governments,” said Dayan.
Dayan said remittance networks in developing countries often tend to offer their services in larger cities. "This has created a remittance divide between widely-served urban and poorly-covered rural or low-density urban areas. Populations in the latter areas face huge transaction costs by using informal and insecure channels for transmitting and receiving funds."
According to IFAD’s president, Kanayo Nwanze, between 30 and 40 per cent of remittances go to rural areas. “It is in rural areas that financial services are most lacking, and it is in those areas without financial services that the cost of receiving remittances is highest,” he said.
IFAD said remittances are expected to top 325 billion dollars in 2010. The largest share is used for food, clothing, shelter and other necessities. About 20 to 40 per cent is saved or invested in such things as small businesses, education and healthcare, it adds.
Multilateral framework
Dayan said the UPU’s goal is to provide citizens with access to efficient, reliable, secure and affordable electronic-payment products and link these with basic account-based financial services.
The organization hopes to work with IFAD on other regional projects in the coming months.
Over the next five years, IFAD says migrant workers worldwide are expected to send more than 1.5 trillion dollars in remittances to their families.